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http://ssrn.com/abstract=1762019
 
 

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Capitol Losses: The Mediocre Performance of Congressional Stock Portfolios, 2004-2008


Andrew Eggers


London School of Economics

Jens Hainmueller


Stanford University - Department of Political Science; Stanford Graduate School of Business

August 1, 2012

The Journal of Politics, Vol. 75, No. 2, April 2013, pp. 535-551

Abstract:     
Given the well-documented effects of public policy on financial markets, one would expect political insiders to be capable of enriching themselves through savvy investing. Consistent with this, two prior studies of stock trades in Congress conclude that members of both the House and Senate easily out-perform the market, fueling the perception that corrupt "insider trading" is widespread in Congress. In this paper, we point out serious shortcomings in existing studies on congressional investing and carry out our own analysis using financial disclosure data from the 2004-2008 period. We fi nd no evidence of either informed trading or above-market portfolio returns for Congress as a whole or any subset of members. In fact, the average investor in Congress underperformed the market by 2-3% annually during this period, suggesting that a substantial majority of members would have financially benefited from replacing their stock holdings with passive index funds. Our research suggests that widespread political "insider trading" in Congress is more myth than reality.

Number of Pages in PDF File: 35

Keywords: corruption, Congress, legislators, insider trading, accountability, political agency

JEL Classification: G10, G11

Accepted Paper Series


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Date posted: February 17, 2011 ; Last revised: June 29, 2013

Suggested Citation

Eggers, Andrew and Hainmueller, Jens, Capitol Losses: The Mediocre Performance of Congressional Stock Portfolios, 2004-2008 (August 1, 2012). The Journal of Politics, Vol. 75, No. 2, April 2013, pp. 535-551. Available at SSRN: http://ssrn.com/abstract=1762019 or http://dx.doi.org/10.2139/ssrn.1762019

Contact Information

Andrew Eggers
London School of Economics ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
Jens Hainmueller (Contact Author)
Stanford University - Department of Political Science ( email )
Stanford, CA 94305
United States
HOME PAGE: http://www.stanford.edu/~jhain/
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
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